Anthony Ostler - Senior Vice President of Investor Relations Jay Hooley - Chairman, President and CEO Mike Bell - Chief Financial Officer.

Ken Usdin - Jefferies Ashley Serrao - Credit Suisse Glenn Schorr - ISI Alex Blostein - Goldman Sachs Luke Montgomery - Sanford Bernstein Brennan Hawken - UBS Betsy Graseck - Morgan Stanley Mike Mayo - CLSA Brian Bedell - Deutsche Bank Vivek Juneja - JPMorgan Geoffrey Elliott - Autonomous Research Jim Mitchell - Buckingham Research Adam Beatty - Bank of America Gerard Cassidy - RBC.

Presentation:.

Good morning. And welcome to State Street Corporation’s Third Quarter 2014 Earnings Conference Call and Webcast. Today’s discussion is being broadcast live on State Street’s website at www.statestreet.com/stockholder. This conference call is also being recorded for replay. State Street’s conference call is copyrighted and all rights are reserved.

This call may not be recorded or rebroadcast or distribution in whole or in part without expressed written authorization from State Street Corporation. The only authorized broadcast of this call will be housed on the State Street’s website. At the end of today’s presentation we’ll conduct a question-and-answer session. (Operator Instructions).

Now, I would like to introduce Anthony Ostler, Senior Vice President of Investor Relations of State Street..

Thank you very much, Stephanie. Good morning everyone and welcome to our third quarter 2014 earnings conference call. With me on the call is Jay Hooley, Chairman, President and CEO and Mike Bell our Chief Financial Officer.

Prior to discussing our agenda, I'd like to take this opportunity to invite our institutional investors and the analysts to join us for our 2015 Annual Investor and Analyst Forum in New York City on Wednesday February 25.

We have chosen this date as it is our confirmed understanding that one of our larger peers will be holding their Investor Day, a day before on Tuesday February 24th in New York City. We look forward to seeing there, if not before. Now to our agenda. Jay will discuss the third quarter highlights and Mike will discuss financial results.

Our third quarter earnings materials include a slide presentation. Unless otherwise noted, all the financial information discussed on today’s webcast will reflect our operating basis results. Please note that the operating basis results are a non-GAAP presentation and this webcast includes other non-GAAP financial information.

Reconciliations of our non-GAAP measures, including operating basis results to GAAP basis measures referenced on this webcast, and other related materials, such as the slide presentation referenced on this call can be found in the Investor Relations section of our website.

Mike Bell, will refer to the financial highlights presentation when he provides an overview of our financial results for the third quarter of 2014 which he will refer to as 3Q, ‘14 and for the nine months ended September 30, 2014 which he will also refer to as year-to-date 2014.

Unless noted separately, Mike will reference only the non-GAAP operating basis results in his comments today.

When reviewing our results to comparisons to prior periods, Mike will primarily focus on comparing our 3Q, ‘14 and year-to-date 2014 performance relative to our third quarter 2013 and nine months year-to-date 2013 performance; unless he otherwise notes that the comparison is sequential from our second quarter 2014 results.

Before Jay and Mike begin this discussion of our financial performance, I’d like to remind you that during this call, we will be making forward-looking statements.

Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in State Street’s 2013 Annual Report on Form 10-K and subsequent filings with the SEC.

We encourage you to review those filings, including the sections on risk factors, concerning any forward-looking statements we make today. Any such forward-looking statements speak only as of today, October 24, 2014. The corporation does not undertake to revise such forward-looking statements to reflect events or changes after today.

Now, I’d like to turn the call over to our Chairman, President and CEO, Jay Hooley..

Good morning, everyone. Before I begin my remarks, I’d like to take a moment to welcome to State Street our new Head of IR, Anthony Ostler. Anthony recently joined us and has over 22 years of financial services experience.

Now to my remarks, our third quarter results demonstrated good core fee growth in asset servicing and asset management, which together were up 9% from the third quarter of 2013, reflecting improved equity markets and new business commitments. Our market driven revenues also performed well in a traditionally seasonally slow quarter.

Our pipelines are strong as evidenced by winning new business of $302 billion of assets to be serviced and we had $2 billion of net new assets to be managed this quarter. On the expense front, we continue to be very focused on controlling cost across our organization.

As we have highlighted for you on the past couple of conference calls, we continue to experience increased pressure from regulatory compliance costs and would expect this pressure to continue in future periods.

Despite the current challenges we faced some low interest rates, we have leveraged our strong market positions and capabilities to generate profitable top-line growth. Now, I would like to provide a brief overview of economic and market developments, and how our business was affected.

For the third year in a row, the third quarter has seen economists downgrade their forecast for global growth for the current and coming year. While not uncommon, this quarter's adjustment has had a number of important consequences. Global commodity prices have fallen.

This has put further downward pressure on already falling global inflation rates and what has been a very uneven global recovery, this means that deflation has returned as a clear and present danger in a number of economies, especially in the Euro zone. This has already created a good deal of policy uncertainty.

The ECB cut its administrated rates on September 4th in response to mounting pressure to further address the region’s weak growth and loan inflation. Additionally, the ECB also began injecting liquidity into the system putting further downward pressure on market rates.

In light of the EBC's decision to reduce deposit and administered rates, we have notified our clients of the potential to charge negative rates or fees on euro deposits. Our plan which is similar to many other banks is to begin charging later this quarter. In contrast, the response of the Fed to the global slowdown is less clear.

Most still project the Fed tightening next year but the timing and scale of rate rises is now a key point of uncertainty. Nevertheless on balance, monetary policy in the U.S. and perhaps the UK will likely diverge in 2015 from the continued easing expected in both the Euro zone and Japan.

These economic divergences and uncertainties appear to have contributed to the return of volatility across assets. Geopolitical factors have also played their part. At the start of the third quarter, volatility across most financial markets was at historically low levels.

Several central bank employees is concerned about this complacency as it potentially reflected the underpricing of risk. There is less cause for this concern now. Volatility has risen consistently across assets, a trend that has continued into the beginning of the fourth quarter. Together these trends impact our business lines in two different ways.

First, the growth downgrade and this inflation risk means the low interest rate environment looks likely to stay for a while longer.

This continues to negatively impact our net interest revenue and net interest margin as high yielding investments mature pay down and have to be reinvested in lower yielding investments currently available in the market.

We also continue to experience high levels of deposits and for liquidity reasons maintain those that we view as excess with central banks. Another short run implication of the environment is that the low rates have continued to impact the spread associated with our securities finance business.

Second, the benign conditions at the beginning of the third quarter, seems to have void asset values and flows into emerging markets. However, those flows reversed in September as the growth scare impacted risk appetite. This was somewhat offset by the return of volatility in foreign exchange markets. The economic divergence between the U.S.

and most of the rest of the world also led to strengthening of the U.S. dollar in the second half of the third quarter. These factors along with heightened risk erosion and an increase in currency market volatility boosted both volumes and FX trading revenues in the third quarter of 2014.

Now, I’d like to talk about the growth of our asset servicing and asset management business. Our third quarter 2014 new asset servicing wins totaled approximately $302 billion, representing a range of clients and sectors. 38% of those assets were from outside the U.S. Also included in the new business were 32 new alternative asset servicing mandates.

New assets to be serviced that remain to be installed in future periods totaled $250 billion at quarter-end and our current pipeline continued strong. In our asset management business, we experienced net inflows of $3 billion for the third quarter.

The flows were driven by net inflows of $7 billion into EPS and $1 billion into cash [bonds] partially offset by net outflows of $5 billion from largely passive fixed-income institutional mandates. Our success in new business commitments across our franchise reflects our efforts to develop continued focus solutions to a continuous innovation.

Given our client focus and ability to differentiate our offerings, we expect to build on our new business momentum for the rest of the year. Now I'll turn the call over to Mike who will review our financial performance for the quarter and outlook for the balance of the year..

Thank you, Jay. Good morning everyone. Before I begin my review of our operating basis results, I'd like to comment regarding the $70 million pre-tax or $53 million after-tax non-operating charge recorded in the third quarter.

This charge reflects our intention to seek to resolve some, but not all of the outstanding and potential claims arising out of our indirect FX client activities. This charge pertains to indirect FX [spenders] which we disclosed over the past few years.

It is important to understand that we do not currently intend to seek to negotiate settlements with respect to all outstanding and potential claims. In addition, our current efforts, even if successful will address only a portion of our potential material legal exposure arising out of our indirect FX client activities.

As I’m sure you can appreciate, settlement discussions are confidential and we’re not able to make more specific comments on those matters at this point. Now turning to slide 9 and note that we’re pleased with our year-to-date 2014 EPS, which has increased approximately 10% relative to 2013.

Year-to-date 2014 core servicing and management fee revenue increased approximately 8% compared to the same period in 2013, benefiting for both higher equity markets and net new business.

As a result of the strong fee growth, year-to-date 2014 total revenue increased approximately 5% despite the downward pressure on net interest revenue from low market interest rates. Third quarter 2014 EPS was $1.35 per share, down from second quarter, but up from third quarter of ‘13.

The decrease in EPS from second quarter primarily reflects lower revenue related to securities finance seasonality and a higher tax rate this quarter partially offset by the benefit of our share repurchase program.

Compared to the third quarter of 2013, EPS increased primarily due to strong growth in our core servicing and management fees, as well as the benefit of our share repurchase program. Total revenue increased slightly from second quarter even with the seasonal decline in securities finance revenue and increased 8.5% from the third quarter of 2013.

Overall, expenses were well controlled in the third quarter, although the result included the benefit from the U.S. dollar relative to second quarter of 2014. The third quarter 2014 operating basis effective tax rate was 31%.

We currently expect the full year 2014 operating basis effective tax rate to be in the range of 30% to 31% which implies an expected fourth quarter 2014 rate of approximately 32%. Now, I’ll discuss additional details regarding our operating basis quarterly revenue as outlined on slide 12.

Unless otherwise noted, my comments here will focus on the comparison of third quarter 2014 to third quarter 2013. I believe this is more relevant since the sequential quarter comparison includes the effects of the seasonal pattern in securities finance. Importantly, servicing fees continue to perform well, up approximately 8% year-over-year.

This reflects stronger global equity markets and net new business. Third quarter 2014 asset management fees increased 14.5% from third quarter of last year, primarily due to stronger global equity markets, net new business and higher performance fees. Money market fee waivers were $11 million in third quarter 2014 which was relatively flat.

Trading services revenue increased 5%, reflecting the continued success in our foreign exchange trading which generated higher revenue as a result of increased volumes, partially offset by lower volatility. Securities finance revenue increased approximately 34%, primarily due to higher volumes in both our enhanced custody and agency businesses.

Processing fees and other revenue increased from a year ago, primarily due to higher revenue associated with our tax advantaged investments and other fees partially offset by some valuation adjustments. Our net interest revenue also increased from third quarter of last year, benefiting from a higher level of interest earning assets.

I would note that the third quarter 2014 net interest revenue also included a $5 million benefit from the prepayment of a corporate bond.

Net interest revenue and net interest margin continue to be pressured from the persistent low interest rate environment and the reinvestment of the portfolio in the high quality liquid assets to meet the new liquidity requirements.

Many of you’ve had questions regarding the European Central Bank lowering the overnight deposit rate to negative 20 basis points and the related impact on a deposit pricing. As market interest rates have continued to drift lower, we’ve notified our clients on potential for us to charge negative rates or fees on all balances.

And as Jay described, our plan is to begin charging for negative rates later this quarter. Based upon our current assessment of market conditions, we expect operating basis net interest revenue for 2014 to be near the high-end of the $2.25 billion to $2.28 billion range that we previously communicated on our second quarter conference call.

This estimate reflects a decline in net interest revenue relative to the third quarter of 2014 actual result, due to the impact of lower market interest rates and the impact of increasing our HQLA to comply with liquidity requirements. It also incorporates our estimated impact of the unfavorable interest rate environment in Europe.

Now moving to slide 13, I’ll provide some comments on operating basis expenses. Compared to third quarter of 2013, our total operating expenses increased approximately 7% primarily reflecting new business support, higher regulatory compliance costs higher transaction, processing and occupancy expenses.

In addition, third quarter 2013 expenses included the impact of lower employee benefit expenses, resulting from plan changes, and a $30 million benefit related to Lehman Brothers related gains and recoveries.

Compared to second quarter of 2014, our total third quarter operating expenses benefited by approximately $16 million, due to the impact of the stronger U.S. dollar. Third quarter 2014 compensation employee benefits expenses decreased from second quarter, primarily due to the impact of the stronger U.S. dollar and lower incentive compensation costs.

Additionally, third quarter 2014 includes a $4 million credit related to our pension adjustment. Transaction and processing expenses were higher than second quarter, primarily due to higher equity values and higher servicing volumes.

Occupancy expenses of a $119 million, increased 3.5% compared to second quarter, due to a one time recovery of $5 million last quarter. Third quarter 2014 other expenses included a $20 million contribution to our charitable foundation partially offset by a $15 million insurance related recovery.

In addition, third quarter 2014 other expenses were lower due to some delays of external consulting expenses, which we now expect will be spent in fourth quarter of 2014. Now, I’ll provide comments on our September 30th balance sheet.

As you can see on slide 14, our overall approach to managing our investment portfolio has evolved to reflect the impact of complying with emerging liquidity roles which is most evident in an $8 billion of U.S. treasuries that we purchased in third quarter of 2014.

We intend to be in full compliance with the liquidity coverage ratio requirements by January 1, 2015. Our interest rate risk position also reflects the impacts of our actions to comply with the LCR roles and we remain comfortable with this risk position.

Additionally, the after tax unrealized mark-to-market gain as of September 30, was $411 million which is lower than June 30th due to a modest increase in market interest rates partially offset by an improvement from narrowing spreads. Now turning to slide 15 to review our capital position.

Our capital position remained strong and that strength has enabled us to deliver on our key priority of returning value to shareholders through dividends and common stock repurchases. As of September 30 of 2014, our holding company Tier 1 common ratio under the current Basel III advanced approach was 12.7%.

Under the Basel III standardize approach, which will not go into effect until 2015, our holding company estimated pro forma Tier 1 common ratio was approximately 10.9%. We estimate that our Basel III supplementary leverage ratios under our interpretation of the final U.S.

rules are approximately 5.7% at the holding company and approximately 5.4% at the bank as of September 30, 2014. Generally speaking, our capital ratios were lower in third quarter of 2014 versus second quarter.

The main contributors to the decline were a larger average balance sheet driven in part by higher levels of client deposits and the reduction in common equity from the impact of a stronger U.S. dollar following through foreign currency translation. Now as I mentioned, returning capital to shareholders continues to be a top priority.

During the third quarter of 2014, we purchased approximately 5.8 million shares of our common stocks at a total cost of approximately $410 million resulting in average fully diluted common shares outstanding of approximately $430 million for the quarter.

As of September 30, 2014, we had approximately $880 million remaining on our current common stock purchase program authorizing the repurchase of up to $1.7 billion of our common stock through March 31, 2015.

So by way of summary, third quarter 2014 results were driven by the strength of our core servicing and management fees and positive momentum in creating services. Core servicing and management fees grew 8% compared to year-to-date 2013 which demonstrates our success in the market.

In spite the headwinds on our net interest revenue; we're well positioned to achieve our full year 2014 operating basis revenue growth target of 3% to 5%. On the expense front, we continue to feel pressure from higher regulatory expectations.

And in addition, we continue to believe that our common stock repurchase program combined with dividends is the best way to return value to shareholders.

So prior to wrapping up, I thought I’ll address a question that is likely to be on investors and the analysts minds and that is, what is our outlook for fourth quarter 2014? Fourth quarter revenue performance could be impacted by overall market conditions in the quarter.

In addition as I mentioned earlier, we expect fourth quarter net interest revenue to decrease relative to the third quarter 2014 results. We currently expect fourth quarter 2014 expenses to be higher due to the continued upward pressure on our regulatory-related costs and the delayed timing of some expenses from third quarter.

Nevertheless, our goal is to generate positive operating leverage for the full year 2014, although the fourth quarter market conditions pose risk that are not completely in our direct control. And with that, I'll turn the call back to Jay..

Thanks Mike. And Stephanie, we're now -- Mike and I are now available to open the call for questions..

(Operator Instructions). Your first question comes from the line of Ken Usdin with Jefferies..

Thanks. Good morning guys..

Good morning..

Just wondering if you could talk about the two core fee businesses in a little bit more depth, and services first, you had a modest growth and I am just wondering if you can help us understand the impact of FX and also just the commentary on the transaction activity this quarter versus last?.

Yes. Let me start that Ken and Mike will pick it up. As far as core services I’d start with the custody service fee base, which was up nicely year-over-year, up a little bit quarter-to-quarter. A reflection in order to priority the markets and we continue to see stronger business growth.

We posted $2 billion of new committed business this quarter; there is 250 still to install. So we’ve had a couple of nice quarters of good momentum in the marketplace. Let me just bridge into foreign exchange, which was another positive performer in the quarter. So, a few things, the volumes and volatility were helper in the third quarter.

And I would say, volumes consistently, volatility really moving from front to back of quarter improved September in particular given the things that I noted. I’d also broaden it out to say that foreign exchange is a pretty wide variety of service capabilities which we provide both to our custody customers, as well as our non-custody customers.

And we continue to see good momentum in I would say generally the electronic trading part of foreign exchange, FX Connect and more recently 3FX, which is the hourly priced against an index.

And even more recently in September, we introduced a new FX vehicle called TruCross, which is designed to allow those who don't want to trade against the WM fix to -- basically it's a trading platform buy side to buy side.

So, I would say, market environment was good particularly towards the end of the quarter and generally volumes were pretty consistent across all platforms. Mike, I don't know you want to add..

Yes. Ken, just add a couple of other facts just to support your quarter-over-quarter analysis. So relative to second quarter, the stronger U.S. dollar depressed our service fees by $10 million. So, if you’ve done it on a constant currency basis rather than 1.302, it would be 1.312, if you used constant currency.

In addition, the transaction revenue was down $4 million sequentially. Obviously we've got a little bit of help from market, so there were pretty sideways if you include Europe. So, as you can see, the underlying net new business revenue was very helpful in the core GS business here in Q3.

As it relates to management fees, as I said in my prepared remarks, the main benefit that we got there relative to second quarter is a combination of positive net new business as well as our performance fees; there the FX impact was negative two from a sequential standpoint.

And in grand total for our revenue, so inclusive of $12 million I just talked about, FX hurt revenue by approximately $21 million relative to Q2 and had a little bit less from that impact on the expenses Q2 to Q3..

Okay, great. And my second question is just to your commentary on the push out in some of those consulting costs into the fourth quarter.

Can you help us understand what didn’t get spend this quarter and the type of magnitude that you’re talking about from a third quarter to fourth quarter overall increase in expenses?.

Sure, absolutely Ken. So this mainly relates Ken to the timing of our regulatory compliance spending, so it’s mainly outside consultants. And so basically where we expected to spend on outside consultancy in Q3, we expect that now still to be spent, but delayed into Q4. And I would range that in the call it $10 million to $15 million kind of range.

Now I’d emphasize the operating expenses category as I talked about in the past, could be pretty lumpy, because we can add some, for example some legal costs in there and even the outside consulting spend tends to be pretty lumpy. But that was what I was referencing..

Okay, got it. So overall expenses, you are still -- and sometimes you typically have like a true up maybe on the comp side.

But are you trying to also say that you expect overall expenses then to be distinctly higher in the fourth or just that portion of it?.

No, we do expect it to be distinctly higher, so the guidance that I had given at Q2 where we thought that Q3 would be 20 million higher than Q2 and Q4 would be 20 million higher than Q2, in aggregate there really has not been a change in our expense view other than number one with the stronger U.S.

dollar, we got $16 million benefit in expenses in Q3. Obviously the Q4 benefit, if U.S. dollar continues to be strong will be what it’ll be relative to Q2, but the currency helped the expense of $16 million in Q3. And then as I said, the timing between the two quarters will reflect the delay in the spending that I just mentioned..

Understood. Thanks Mike..

Your next quarter comes from Ashley Serrao with Credit Suisse..

Good morning guys..

Good morning..

Mike, just hoping you could flash out where you stand on LCR today and just your latest thoughts around preferred issuance?.

Sure. Good morning Ashley. Regarding LCR, as we’ve talked about previously, we do expect to fully be in compliance by year-end with the Fed's expectations. And we estimate that if we calculated that LCR as of September 30th, we would be in excess of the 80%.

Now, I would tell you that following up on a question you asked me last quarter Ashley, the final Fed expectations regarding the actual calculation of operational deposits is not entirely clear. It's sort of slowly getting clear but not entirely clear.

And that’s as a result, following up on the question you asked me last quarter, at some point, we need to firm up the overall impact on our NIR. I would expect it to be modestly higher impact than what we had communicated previously but we’ll have some more information on that in 2015.

And as it relates to the preps, first of all, no change in that for the risk based capital ratios; we would ultimately want to get to 1.5% at a minimum of our overall capital structure being prep. So that would equate to approximately $1.8 billion.

So that means we need another $500 million at some point relative to the balance of preps that we have currently. So just looking at the risk based ratios, no change in our expectations. The wildcard continues to be, Ashley, around compliance with the supplementary leverage ratio.

And since at this point, it still looks like the supplementary leverage ratio will likely be our binding constraint. I would say it is likely we will go beyond the $1.8 billion that I just referenced and ultimately issue more press than that.

Again at this point, I wouldn’t give an updated number or an update on timing, but that continues to be our thinking..

Great. Thanks for the color there. And then just on the current reinvestment environment, I appreciate the guidance for this year. But just maybe a sense around what the reinvesting deals are in the U.S.

versus Europe? And then any thoughts on what a flatter yield curve means for you in net interest revenue sensitivity would be appreciated?.

Sure. Well, as you can imagine, it’s a little early to talk about 2015 because there are so many different moving parts going on there.

Obviously, if we got to a flatter yield curve by an increase in short-term interest rates, we would view that as a very positive thing, particularly given that we’ve got about half of our portfolio is invested in floating rate securities. So, an increase in short-term rates will be very helpful.

I would also reiterate that we will particularly benefit from the first call it 50 basis point increase in -- the first 25 basis point of increase in short-term rates would likely accrue very heavily to our benefit, but even the second 25 basis point increase would also help us.

So, if we get to a flat yield curve by raising the short-term rates that would be a very good thing. As it relates to Q4, we’ve got some obvious headwinds. We’ve got first of all, Q4 you don’t want to back out the $5 million benefit we got in Q3 from the prepayment on that corporate bond, so I would do that right off the top.

But then we’ve got three other items that are driving down our expectations for NIR in fourth quarter. They are; number one, Europe, as you just mentioned, the market interest rates in Europe have dropped between 20 and 25 basis points at the short-end over the last five months.

The [ECB] has obviously cut the rate from zero now to minus 20 in that same period. So, as Jay talked about, we're working to pass along that cost to our clients. So, but that will still be a headwind for Q4. In addition, we have now higher level of HQLA that's going to be a drag because we're obviously not doing any spread on the HQLA.

And then third is just a normal grind as the portfolio matures and rolls off. So, as a result of all those things, we expect Q4 to be lower than Q3 from an NIR perspective. I think it's too early to try to speculate on 2015..

Great. Thanks for all the details there, Mike..

Your next question comes from the line of Glenn Schorr with ISI..

Just ISI. Thank you..

Excellent..

And I don't have a [bow] either. So, just one point Mike on the clarification of the 4Q costs, in a standing steady state world, currency neutral fourth quarter from third quarter.

We might add back that $16 million benefit on currency, the $10 million to $15 million catch up on the delayed consulting cost and then another $20 million on top for what was already planned on the consulting cost.

I just want to make sure that I have that right?.

Yes that's fair, Glenn. I mean that probably puts more precision on it than it is warranted because again some of those other operating expenses are pretty lumpy. But directionally you are thinking about it just fine..

Okay.

And then on the regulatory question, we think of them as having a big seasonal component, because basically June through December is hot and heavy, or is this annual run rate thought process? In other words, should we get a benefit in first quarter as CCAR’s done and you take a breath?.

Yes. Unfortunately Glenn, I mean there are a lot of moving parts to answer your question. You're certainly right that I would expect CCAR specific cost particularly outside consulting expenses to decline in Q1 of ‘15. But unfortunately, CCAR is just part of a wide horizon of regulatory expectation.

So, I think it’s a little early to speculate on Q1 2015 or even full year 2015 regulatory compliance costs; we’re in the midst of the budget process as we speak.

Again, a lot of moving parts, just to sort of give you a flavor for it, first of all I said before, we’re seeing regulatory expenses, excuse me, regulatory expectations be higher in a number of different areas, not just CCAR. So that’s putting some upward pressure on expenses.

On the other hand, we do expect over the course of 2015 to be able to reduce our reliance on outside consulting expenses and ultimately replace that more with full time employees. So we expect to get some cost arbitrage there. So again, a little early to try to conclude on 2015 at this point..

Okay. And then maybe just a very high level thought because it’s so new. CCAR stress test came out last night. And I would just say particular to you guys balance sheet’s grown 27%, it’s help to offset some of the NIM compression. But the test specifically has wider credit spreads and a flatter curve relative to last year.

Is this just a little bit worse, is a lot worse? I’m just trying to get your gut reaction given the importance of that part of the test for you guys..

Glenn, obviously we've had less than 24 hours to fully digest it and to run it through our models and such. But I would characterize it as modestly worse than last years, but again with the caveat that I am sure there will be some other devils in the details.

But particularly the fact that the equity market decline would be higher than last year would be a particular area given our concentration in terms of our clients on equity assets..

Okay, thanks very much..

Your next question comes from Alex Blostein with Goldman Sachs..

Hey guys, good morning..

Good morning..

So, a bigger picture question I guess when we think about State Street’s exposure to Europe. You guys clearly have significant business there and there is number. There is not a place as obviously where it hits the P&L, both on the NIR side with respect to securities rolling over but also as you kind of translate from euros to the dollar.

As we think about the enterprise as a whole, strengthening dollar I am assuming is not a great thing but maybe you can flush that out a little bit more and give us a sense of from a pre-tax dollar perspective what the sensitivity could be?.

Let me start that because I think it has -- there is a revenue side to that and there is an expense side. And Mike can pick up the currency effect as well as the effect potentially on the portfolio. But from a revenue side being our ability to generate servicing fees and management fees really unaffected, it’s anything neutral to positive.

I think if you look at our new business momentum over the past several quarters, Europe has been a little bit of a bright spot.

I’d even go a little deeper to say if you look at flows which is the other element of a critical element of organic flows; the offshore markets continue to perform exceptionally well, Thailand and Luxembourg where we had deep presence.

So, from a standpoint of the fee revenues, I don’t really see effect that the Euro zone continues to have difficulties affecting that, in fact if anything that’s a little bit positive.

Mike, why don’t you talk about that?.

Sure. So, Alex, first from a P&L standpoint, I would characterize this as being relatively neutral to the FX changes because roughly speaking, it’s not perfectly accurate, but roughly speaking, our revenue in different currencies tends to match our expense structure in different currencies. So, I would characterize this as roughly neutral out there.

As it relates to the impact on our capital levels, we’re modestly exposed, I wouldn’t characterize it as material, but we’re modestly exposed to the fact that we’ve got some capital in non-U.S. currencies. And therefore -- and that’s really weighted a little more heavily than for example the risk weighted assets in those same currencies.

So as an example, what we saw at the end of third quarter was when the euro weakened so much relative to the U.S. dollar, we saw an impact on the September 30th currency translation and therefore that negatively impacted our capital ratios at Q3.

Once again, I don’t view that as a long-term threat, but I do view it as a source of fluctuation that can go either way quarter-to-quarter..

Got it. Thanks for all that detail. And then the second question is -- and I appreciate the fact that it’s still probably quite early. But as we think about NSFR and the way it could impact the broader securities lending industry.

I was just hoping to get your thoughts on your business with respect to; a, your growth in enhanced custody to you think can stand where does you see a little bit of a principle business for you, but also the secondary impact and kind of what your core agency business?.

So, let me start at Alex. Mike noted that our securities finance business this quarter was particularly healthy when you contrast it against last year’s same quarter. And the growth was driven by better loan volume overall I would say of the growth. Two-thirds of it roughly was enhanced custody versus the agency business.

So, generally good strength in the securities lending business, I don't see that abating. I think your question was to the NSFR. In our enhanced custody business, we have found ways to minimize the capital effect through netting with the counterparties that we’re lending securities to, which has resulted in a pretty capital efficient trade.

So, as we look at enhanced custody, which is a business that we see not only have seen good growth in, but we see the prospect for even increased growth. We think it can be done on a reasonably capital efficient basis.

Mike would you add to that?.

Yes. Alex the only thing I would add that Jay is exactly right. The only thing I would add is that I do expect that prices will likely increase in that market particularly for those clients where we can't reach netting agreements with them. And I don't think that would be just us, I think that will be a phenomenon across the marketplace.

So, our orally read is exactly what Jay said. We do expect this to be attractive business for us from the capital return standpoint overtime particularly with the [NIM]..

Understood. Thank you. Thanks so much for all the color..

Your next question comes from the line of Luke Montgomery with Sanford Bernstein..

Good morning. Just following up Alex’s question, I was curious if you could elaborate on it appears to be a little bit of improvement in securities lending, you seem to think that’s maybe a little bit durable.

But perhaps you could address what you’re seeing in terms of structural changes since the crisis, what types of splits you’re getting with client, the level of participation programs and the demand for activity related to collateral versus special lending?.

Let me start that again Luke. If I take it up and broaden it, the participation securities lending from a customer standpoint has been stable to maybe slightly up. So, we’ve come through a long cycle over the past six years of people leaving the program then rejoining the program. And that’s been pretty stable if not say anything it’s a plus some adds.

If you look at the -- now the other thing you’d look at would be unknown balances which have been over the past couple of quarters running at about $350 billion plus or minus. Within that the loan growth has been good and the attractiveness of spread is particularly driven by merger and acquisition activity driving specials.

Again has been a positive in the last couple of quarters. You asked about structural changes, the one that comes to my -- most to me is this decrease in leverage that the banks are going through.

And as a result, we’ve seen the prime brokers be a little bit more selective about lending, which has really opened the window for that enhanced custody business that we frequently talk about.

So, I would say if you look at sustainability, durability of trends that are going on, you can make your own judgment about whether the M&A activity will continue to be robust. But other than that, I think I would say it looks pretty durable from the standpoint of trend..

Yes, Luke. It's Mike. The only thing that I would add is just thinking about it from a quarter-to-quarter perspective, first of all with the bad news and then with the good news. On the bad news side, Q1 was pretty difficult, spreads were tight.

But as Jay said, we saw with the dividend arm season spreads and volumes pick up in Q2; in Q3 the volumes and spreads were attractive for example relative to a year ago.

And again we attribute that primarily to higher M&A volume, higher IPO volume, and again whether it's durable into the future is a little bit of a crystal ball question but we're certainly happy with the trends we've seen over the last six months..

Great. Really helpful. And then on the FX settlements, I think I recall a few years ago when this broke, you seemed fairly resolute that the cases that didn't have a lot of merit.

And I know it's difficult to say much given that you still have a number of cases pending, but maybe hoping you could provide some detail about why you decided it was in your best interest to settle in these specific cases? And then maybe in terms of order of magnitude or just number of cases how much of this might be behind us?.

Yes, Luke. First of all, just to be clear, we're not announcing settlement on these cases but these are basically situations where we are putting up reserves based upon additional information that we have.

And I would not try to speculate what percentage of the overall pie this is going to relate to in terms of the indirect FX business; I think it’s way too early to try to size that..

Okay. Fair enough. Thanks for the clarification.

And then just a real quick technical question; wondering how you plan to charge for negative rates, whether you determine that will appear as a credit to NII or the fee more or is that going to just differ across other clients?.

Yes. Luke, it’s likely to differ by client and differ by country, so different by a jurisdiction but I would expect at this point speculating that the vast bulk of that would show up as positive fees. But once again, more to come there..

Okay, great. Thanks so much..

Your next question comes from Brennan Hawken with UBS..

Good morning guys. Thanks for the taking the question. First one on the balance sheet. So, we saw a pretty nice sequential increase in deposits here.

How much of that was non-operating? And do you have any insight into what might have driven some of the growth given how strong it was?.

Yes Brennan, it’s Mike. First of all, we expect -- we estimate that the underlying growing in our core business was about call it $2 billion to 3 billion of the growth in our overall deposits.

And the remainder of the growth in the balance sheet was a combination of growth in excess deposits as well as some issuance of wholesale CDs which were an important part of our plan to comply with the LCR..

Okay. And that $2 billion to $3 billion is both U.S.

and international?.

That’s correct. That would be a combined number..

Okay, terrific. And then thinking about the delta in SLR, clearly balance sheet growth was part of the drop there, sequential 40 basis points; AOCI looked like it fell too.

Were those the main drivers and could you break down the 40 basis points and what were the main allocations specifically the big factors?.

Sure Brennan. So, those are the two main pieces. The growth in the balance sheet was approximately two-thirds of the 40 basis-point decline in the SLR and the other third when you’re referencing AOCI, that's mainly the currency translation adjustment that I mentioned earlier, what we saw a drop in the euro rate pretty significantly at September 30th.

Again from foreign currency translation standpoint, that's calculated on a spot basis based on currency rates as of September 30. So, it had a -- the drop in the euro had a disproportionate negative impact on the value of our euro capital as it gets converted to U.S. dollars and that was about a third of the 40 basis-point decline..

Great. Thanks a lot..

Your next question comes from the line of Betsy Graseck with Morgan Stanley..

Hi, good morning..

Good morning..

So, just a couple of follow-ups, one on the [Altera], I just wanted to make sure I understood it will be 80% by 1/1/15 and the 100% is the next year 1/1/16.

Is that accurate?.

Betsy, let me just repeat what I said earlier. We do expect to be comfortably well above the 80% at 1/1/15. We do estimate that we'd be above the 80% as of now. But we would expect to have a very comfortable margin relative to the 80% at 1/1/15..

I just wondered because you mentioned full compliance, so I wasn’t sure if that meant full compliance with the interim step or the final step so?.

Yes. Again, I would characterize this as we’re in full compliance of the 80% now, but the -- I do think at the end of the day our regulators would expect overtime for us to have a significant buffer relative to the 80% and I would expect to meet that buffer at 1150..

Okay. And then on just the European deposits and the negative interest rate you’re going to be charging due to the fact that ECB is charging you 20 bps.

Can you give us a sense as to how you’re talking about with clients? And I’m wondering is there a way that some of your clients can avoid this potentially from going from euro to another currency or through getting discounts for more soft dollars or is there -- just wanted to understand how your positioning is?.

Betsy, this is Jay. First off, 45 days ago we informed customers of our intent. I think to me the question will be, is this charge enough to cause people to deal with their excess deposits in a different way. We would expect that there will be some for those deposits and that’s probably a positive thing overall for us.

But I don’t think it would cause customers to change investment strategies or anything that would relate to those excess deposits, I think it’s just a matter of -- is the charge enough of a deterrent to keep deposits with us and therefore would they could they in some form move some of those deposits away from our balance sheet.

But I think that’s the extent of the impact..

Okay.

Have you seen any activity to-date from when you announced you were intending to charge this? I'm wondering if people have already started to move out of euro to other currencies or you just really haven't seen much behavioral change yet?.

We have not seen any behavioral change. And while we think about the intent, we won't start charging until later on in the quarter..

Right. Okay. And then just lastly on the preps, I know you indicated that there is another plug for us to do here at some point when market conditions -- I'm just wondering what's your sense on that kind of timing or when you'd want to get that done. You probably were thinking maybe to do it by the end of 3Q that just passed for CCAR reasons.

But just like to get a sense as to how you're thinking about it given the fact that some restrictions come down so much.

Is there an opportunity here?.

Sure. And Betsy, this is something that we're looking at. At this point, I wouldn't commit to a specific timing.

But I would say just to give up a high level answer, I would certainly expect within the next 12 months that we would look for a potential window to go ahead and get a $500 million, but it will depend upon market conditions, it will depend upon our outlook. So, I'd say a number of different factors to think about..

Okay. Thank you..

Your next question comes from Mike Mayo with CLSA.

Hi. I wanted to go back to lend a little bit. Jay, how do you view the market share shifts in overall custody? On the one hand you mentioned that the strong new business growth this quarter, which is a positive. On the other hand, it looks like some smaller players in Europe wants the mandates over the past year.

And even further back just a big picture question. When we look at State Street's market share almost a decade ago and adjust for your acquisitions of Goldman in 2012, Intesa in 2009, Investor’s Financial in 2007.

It looks like your market share on a core basis adjusting for those acquisitions would be a little bit less in overall custody, regardless of what degree of [discrete], how you think about that market share would be helpful?.

Sure. I can’t track all the numbers that you have Mike without doing a little math on my own but I would say generally we focus, we’re most concerned about market share in the most attractive markets that as we view them.

So, if you look at I would say, starting out broadly asset servicing -- not asset servicing, but asset management versus asset owners, so investment management versus pension funds, by our math, we have held if not gained market share over long periods of time in the asset servicing for asset managers; pension funds probably a little bit more stable.

So that would be my first cut at it.

But then I would probably go a little deeper Mike, and if you look at some other faster growing streams in the world, I’d start with the alternatives, hedge, private equity, real-estate, 10 years ago we were nowhere that was in the market, today we’re the market leader by quite a bit and I think are positioned to continue to grow and gain share.

I’d look at another fast stream; I’m in the U.S. right now, primarily ETF market which is close to $2 trillion now. We have a pretty significant share of the ETF servicing marketplace, so again fast growing market where we have established early position and have grown disproportionately with the market.

And then, I guess the third place I would go is the derivative of the asset management market, if you look at the European market where we have a deep presence. Our market share leadership in both the Irish and Luxembourg offshore markets is pretty commanding and I would say continuing to grow.

So, I look at the question and I break it down as I always do to say, as you look you in your crystal ball, which of the geographies, which is the markets, and which are the products that we think have a higher growth trajectories and making sure.

I think we've done a pretty good job and getting in front of those growth markets that have turned out to be pretty attractive. So, that's one cut at it..

That's helpful.

And so just going back to the core custody business away from those growth areas that you emphasized, how is competition currently compared to the past? Is it getting easier and you're gaining more business that way or is it harder or what's the rate of change?.

I would say it never gets easier. But I think it's I would say largely unchanged. I would say and it depends a lot by market. In the U.S., there are two or three different verticals, you have mostly U.S. competitors, we all have strength and weaknesses. If you go to Europe, you'll introduce a few additional competitors.

I would say Mike that over the years following the financial crisis and particularly last couple of years, pricing has seemed a little bit more stable to me; there can be a situation where somebody will throw in irresponsible place.

But I would say most of us in the servicing side of the business are being a little bit more careful about and thoughtful I should say about how we price these opportunities.

I’d also say what's helped that and I know we’ve done some of this, but we're not alone is particularly when you have an intermediary in the sales process, a consultant in particular. We’ve been really to walk away from deals that didn’t make economic sense; I’ve seen others do that as well.

And I think over time that can create a little bit of a firming up or bottoming of the pricing..

Are you willing to give up market share when the pricing doesn’t make sense a little more often?.

Absolutely..

All right. Thank you..

Your next question comes from Brian Bedell with Deutsche Bank..

Hi, good morning folks..

Good morning..

Good morning. Most of my questions have been answered, but just couple of more to drill down a little bit deeper.

On the -- just looking at the average balance sheet on the deposit pricing, I guess first of all, take a picture of what do you view as your level of excess deposits right now? And then in terms of the impact, if you can go into a little bit more granularity on charging for -- when you charge for deposits later in the quarter, how that’s going to impact the -- just looking at the average balance sheet, the average yield on your interest bearing deposits down 5 basis points linked quarter.

How you see that dynamic changing because you mentioned there will be a fee offset; and where that would come in on fees on the P&L?.

Okay. So Brian, it's Mike. First of all, on your question on excess deposits, we estimate that our excess deposits at the end of -- I’m sorry not at the end of third quarter, during the average of third quarter was approximately $48 billion.

And so we expect that in third quarter, we were earning a NIM on those assets, call it in the high-teens, down what we’ve given in the past an estimated NIM on excess deposits of 20 basis points.

The fact that the rates dropped in euro, the short-term interest rates dropped in euro, call it 20 to 25 basis points over the last five months mean that would push the overall NIM down to the teen’s level.

I would expect that there is at least the potential for the excess deposits to decline in Q4 if in fact the [rural] excess deposits that we’re getting in negative rate would go somewhere else, but that's speculated I probably speculated that all year and that long as excess deposits continue to grow.

So I don't know how much confidence that gives you in that estimate..

But then as you charge for this, assuming some of the deposits stay we should see a pick up in the net interest margin that you just outlined from the high-teens?.

I think I'm not sure that's actually the case because we're likely to pick up a partial quarter for the most part, and maybe modestly higher fee revenue as a result of charging for deposit. So, I don't think that's going to help the NIR per se. We're earning negative interest rates on the asset side of those excess deposits.

And again I think the negative rate credit decline will show up likely in all likelihood of fees not improves NIR..

Okay. Then [segueing] to fees, first of all would that show up in the core investment service fee line? And then secondarily, if you back out the impacts you said from both volumes and FX currency translation versus the second quarter, your fee growth is actually stronger about 2%.

So, just going back into some of Jay's comments earlier about some of the risk-off, I think you were saying, Jay some of the risk-off in later September looking into fourth quarter.

How should we think about that positioning in terms of your yield on those custody and the [liquid] assets?.

So Brian on your first piece again, I do think that negative credited rates on deposits in Europe would likely show up in the service fees. I mean we’re talking a few million dollars I mean this is not a big ticket item. So, I don’t think it’s going to hugely move the needle relative to the other factors.

And I’m just going back to the earlier question, I wouldn’t say that for the most part the improvement that we got Q2 to Q3 in global services revenues X the impact of currency and X the impact of transaction it was mainly net new business volumes. Jay wants to comment on the risk-on risk-off question..

Yes. I would say, picking up on my prepared remarks, Brian, there was a little bit of risk-on at the beginning of the quarter and became risk-off at the end of the quarter somewhat offset by the volatility in foreign exchange or currency markets..

Okay..

And the equity markets have come back a little bit, so it’s hard to predict at this point..

All right, okay. No, that’s helpful color. Great, thanks very much..

And your next question comes from Vivek Juneja with JPMorgan..

Hi Mike.

A quick question for you, on this incentive comp reduction that you had in the third quarter, was there a reversal of an accrual and if so how much?.

Yes. Vivek, there is not a reversal of an accrual in terms of incentive comp. What happens is that the way we accrue incentive comp it tends to accrue based upon our overall level of earnings I mean there are some adjustments that go into it plus and minus. But as a result of again those factors, the accrual was slightly lower.

That was not a material impact in the quarter itself..

Okay. And then secondly, your ABS came down pretty sharply in the quarter, while I guess treasuries went up. So that's the change going on, I'm presuming.

And how much more do you need to do in that?.

So, first of all, you are right in terms of your description. We did have a major security sale in the quarter and basically reinvested the proceeds in U.S. treasuries that's all part of being LCR compliance.

In terms of how much more we need to do, as I mentioned in an answer to an earlier question, the overall regulatory expectations regarding the calculation of operational deposits under the LCR requirements is still not entirely clear. So, I’d rather not try to be pin down to a number, when it's a moving target at this point..

Okay. Thanks..

Your next question comes from Geoffrey Elliott with Autonomous Research..

You mentioned that the net interest income impact from the LCR was probably going to be a big higher than you discussed previously. So, I wonder what was in the final rules that were different from what you've been expecting..

Yes, Geoff, it's Mike. I'd assume a number of different factors and some of it actually relates to the underlying expectations of the calculation itself as opposed to change in the rules.

But as an example, we have what we view to be operational deposits from both hedge fund clients as well as private equity clients that are explicitly excluded from the regulatory definition of operational deposits. I mean we view that as unfortunate, but those are the rules.

So that would be an example of something that will push up our need to hold more HQLA that we previously thought..

And then my second question is on the FX trading revenues.

Can you give a sense of how those were distributed over the quarter; was there a big pick up late in the quarter as (inaudible) came back or was it kind of more even throughout?.

I would say, Geoff, this is Jay. It was slightly tilted towards the back end of the quarter, followed the volatility change throughout the quarter that I mentioned; volumes were pretty steady throughout..

Geoff, it’s Mike. I would just add the volumes have really been strong, as Jay indicated. So again, we view that as a very positive thing and also a positive sign that the investments that we’ve made in our direct FX capabilities over the last several years are really paying good dividends..

Right.

So strong volumes were out and that kind of take it from the volatility at the end?.

Correct..

Great. Thank you very much..

Your next question comes from Jim Mitchell with Buckingham Research..

Good morning. Just a follow-up on the preferred issuance thought process around the SLR. It seems to me that if you take a balance sheet back to where it was a year ago and assume some of these excess deposits run-off, as rates eventually move higher.

You add based on my back of the envelop, almost 100 basis points to SLR and then all of a sudden it’s not a constraint.

So as you think about meeting that at least temporary constraint with preferred, does it make sense to wait to see how the excess deposits? I just want to get a sense of how you’re thinking about the additional preferred above 1.5%?.

Sure Jim, it’s Mike. First, what you're describing is rational and that is part of the overall calculus in terms of the prep issuance as I was mentioning to Betsy; there are a number of different things to think about. One of those of course is what will happen to excess deposits, particularly when rates rise.

The other piece though that you didn't mention and I feel compelled to mention is remember that by the time we get to 2018 and the SLR is fully in effect, we will have lost all of the interim credit on the intangibles. And so we estimate that that's worth about 40 basis points.

So on a pro forma the 5.4 down to 5.0 for the loss of that credit on the tangibles. And then as you said, you could considerably boost it by a 100 basis points if you assumed all the excess deposits found in different home. We probably still want to have some kind of buffer off the six.

So I wouldn't characterize preps as being our only lever but that would be a scenario where we might meet all the items that you mentioned and still end up with additional preps..

Okay. That's helpful and makes sense.

And then just maybe a follow up on the NSFR, have you looked at all how that may impact the way you think; is there more liquidity you need about the LCR, or do you feel like the NSFR is at the least the way it's proposed so far is pretty manageable?.

Jim, again, as you can imagine, it's early since we don't have any final rules to evaluate. I think it would be a little bit early to say anything definitively.

I think based upon our interpretation of the preliminary guidance, it would require some additional HQLA, but I think the devil will be in the details of the final rules and I wouldn't try to speculate and try to put a number on it at this point..

Okay, great. Thanks..

Your next question comes from Adam Beatty with Bank of America..

Thank you and good morning.

Just one question from me today; in regards to your operating leverage target, I was just wondering given where your business sits right now and where the market conditions are? Would you need in terms of it be subject to market conditions would you need the market to revert to more of an upward trend with flat from here allowing you to achieve operating leverage, what’s the color around that? Also it seems like you’re somewhat confident about heading your goal in terms of revenue growth, to me that sort of points to expenses as maybe the risk around operating leverage maybe if you could just flag up the biggest risk that you see? Thanks..

Sure. Adam, it’s Mike. Again, there are number of different factors that will impact the Q4 revenue.

Obviously as we talked about earlier, we were pleased with the Q3 results in particularly the strength in our core servicing and management fees and then the additional benefit that we got from the strong direct FX trading results and also the securities lending business both enhanced custody and the agency businesses, obviously we’re pleased with all of that.

Exactly what conditions are going to be in Q4 in all of those areas; it’s too early to tell. Having said that, we’re at 5% year-over-year revenue growth through nine months, I certainly expect that we’ll [barrowing] that catastrophe meet the 3% to 5% overall revenue target.

But you’re absolutely right; the expenses have been a headwind for 2014 mainly the regulatory compliance costs are the main item that we had not anticipated at the beginning of the year when we were laying out our budget targets and expectations for full year.

I think we’ve actually done a pretty good job in Q3 offsetting the impact of the higher regulatory expenses by finding other savings in other areas and opportunities to redeploy staff as opposed to having it all be incremental.

But I certainly would not argue with your point that expenses have been a risk factor throughout the year relative to where we started the year..

Thanks Mike. I appreciate it..

And your last question comes from Gerard Cassidy with RBC..

Thank you. Good morning guys. Mike can you share with us the duration of the bond portfolio extended out slightly this quarter to 2.1 years.

What's your comfort level, how far out would you consider going?.

Sure Gerard. Well first of all, I think it's important to understand that there has been no change at our philosophy or overall approach to interest rate risk in this quarter. You are right that the duration of the portfolio increased modestly.

But importantly, please realize as well that our central bank deposits increased significantly in the quarter as well. So, we ended up on average for the quarter with central bank deposits of $53 billion.

So, when I think about the duration of the asset side of our balance sheet, I look at it as a combination of the investment portfolio with as you said, the duration of a shade over two and the central bank deposits, which have a duration obviously of zero. And as part of the LCR compliance, we've had increase our HQLA revenues significantly.

We've done that through an increase in central bank deposits, but also an increase in U.S. treasuries. Weighted together, I don't view it as a material change relative to Q2 or Q3. And certainly there has not been a change in philosophy..

Great. And then second, can you remind us; you touched a little bit on earlier in the call that you’d benefit obviously from a rise in short-term rates and if the curve flattened initially, that would be positive.

If we were to get a 100 basis-point rise and rates, what kind of favorable impact in net interest revenue would that be?.

Yes. Gerard, I think that’s a difficult one, because it will depend upon a number of different factors, not the least of which is whether the excess deposits that we have the $40 billion of excess deposits that we had in Q3 stick around or not. We do put some sensitivities out in the 10-Q. Again those based on static client behavior.

And again our own thinking Gerard is that if we did see, certainly if we saw 100 basis-point increase in short-term rates, we believe that the vast bulk if not all of the $48 billion would likely find the home somewhere else. So I think it’d be difficult to try to quantify that.

I think the way -- I’d say how I think about it, I think about it as if we get a 25 basis-point increase in rates, particularly short-term rates, I think we will get a benefit on the asset side of the equation, particularly the half of the portfolio that is affording rate portfolio, we’d expect this would get the bulk of the 25 basis-point benefit on that half.

On the half that’s fixed investment rate will get that over time as the portfolio rolls over. And with rates of essentially forward in so many jurisdictions, we wouldn’t expect much move in the liability side.

And then as we’ve talked about the second 25 basis points, it’s a little more shared between us in our clients and then it’s different beyond that. But overall, I would characterize this as a net item, but not one that I would try to quantify at this point beyond what we put out in the Q..

Great, thank you very much..

Stephanie, I want to thank you and thank everybody else for joining us today on the call. And we look forward to speaking with you again at the end of the fourth quarter. Thank you..

Thank you. This concludes today's conference. You may now disconnect..